Explain the behavioral problem that can result when cost-plus prices are based on variable cost.

Q: How does the variable cost per unit change as the level of activity (or cost driver) increases? Why?

A: A variable cost changes is directly proportional to the change in the level of activity or cost…

Q: explain why GAAP requires full absorption costing (instead of variable costing) if absorption…

A: Introduction:- i)Absorption costing:- Under the absorption costing, The following costs included in…

Q: What is target costing and how is it different from the usual process of setting prices?

A: The price of a product is set on the basis of the cost of the product. The price of the product is…

Q: ‘Costs maybe classified in a different type of behavioural costs such as variable and fixed costs…

A: solution : concept : variable costs               variable costs are those costs which varies along…

Q: If the ordering cost triples in an EOQ model, while the remaining values stay constant, how will the…

A: Economic Order Quantity is a model which aims to minimize the total inventory cost including the…

Q: The main problem with the cost plus strategy is O incentive to show higher costs. incentives to…

A: Cost - plus pricing strategy:- A cost-plus pricing strategy, also known as a markup pricing…

Q: Explain the difference between price-takers and price-setters.

A: When a company cannot dictate prices then it is known as price taker. On the contrary, when a…

Q: Give an example of how a manager can decrease variable costs while increasing fixed costs?

A: Variable Cost: Variable costs are costs which are directly vary with the change in production.…

Q: What are some factors that affect variable costs?

A: Variable costs: A variable cost is a business expenditure that varies in proportion to manufacturing…

Q: Why is there a need to separate mixed cost as to variable & fixed cost?

A: Variable cost: these are the costs which vary with the units produced. These costs increase by…

Q: How can the WACC be both an average cost and a marginal cost?

A: Weighted average cost of capital is the aggregated cost of capital with respect to the weights or…

Q: Explain the difference between fixed cost and variable cost? Support your answer with examples

A: Cost:   It is the economic value of resources incurred by a firm to manufacture a product or render…

Q: What is the similarity of fixed costs with variable costs and its differences.

A: similarities and differences of fixed cost and variable cost are discussed in step 2

Q: How is target costing different from the usual process of setting prices?

A: The price of a product is set on the basis of the cost of the product. The price of the product is…

Q: Describe the downward demand spiral and its implications for pricing decisions.

A: Downward Demand Spiral: A downward demand spiral is a continuing reduction in the demand for a…

Q: Define variable cost and fixed cost. Give an example of each?

A: Variable Cost: Variable cost refers the cost which varies due to the change in the level of…

Q: What is the difference between a linear and a nonlinear cost function? Give an example of each type…

A: Cost Function:Cost function represents the basic change comes in the total cost due to the change in…

Q: What are costs that have characteristics of both a variable and fixed cost?

A: A cost that has characteristics of both a variable cost and a fixed cost is called a mixed costs or…

Q: Types of Fixed and Variable cost with the help of example and graph?

A: Costs are the total spent amount for the expenditures and for producing the goods and services.…

Q: What is a variable cost? Identify two variable costs.

A:

Q: Explain the term Variable costs?

A: Cost is the total amount that has to be paid for a product.

Q: According to our authors, explain the concept of “lower-of-cost-or-market.”

A: When a company prepares its financial statement, it reports certain items in the financial statement…

Q: What is the primary disadvantage of basing the costplus pricing formula on absorption cost?

A: Definition: Cost plus-pricing approach: The pricing approach used by the companies to set the target…

Q: What is the correlation between fixed, variable, and semi-variable costs??

A: Introduction:- Fixed Costs – Costs are same irrespective of the number of output produced Variable…

Q: Giving examples, distinguish between Variable cost and Fixed costs

A: Introduction: Costs: Costs are of two types: 1 ) Fixed costs 2 ) variable costs

Q: What is a relationship between fixed, variable and semi-variable cost?

A: Cost can be defined as the amount incurred upon the production of goods and services for the final…

Q: What are the advantages and disadvantages of target pricing versus cost-based pricing?

A: Advantages of target pricing are as follows: It help in controlling in cost It provide profit with…

Q: Absorption costing is more compatible with cost-volume-profit analysis than is variable costing.…

A: Variable costing simply covers the variable costs actually incurred in production, but not any of…

Q: “All this marginal revenue and marginal cost stuff is just theory. Prices are determined by…

A: Pricing decisions:   Pricing decisions is one of the most important and required decision for the…

Q: Give an example of how a manager can increase variable costs while decreasing fixed costs?

A: Fixed costs refers to those which do not change according to the change in units of productions.…

Q: simple cost analysis method to identify fixed costs and variable costs in a linear cost function is…

A: High low method is method which separates the elements of fixed cost and variable cost from the…

Q: Discuss the relationship between fixed costs, variable costs and risk.

A: 1. Fixed cost Fixed assets are assets that are used in an organization for the purpose of long-term…

Q: what consequences can broad averaging have on costs?

A: Broad Averaging: Broad averaging is also known as peanut butter cost is a costing approach of…

Q: In order to draw a basic break-even chart, which of the following information would you not require?…

A: The break even sales are the sales where business earns no profit no loss during the period.  The…

Q: Explain why cost predictions based on the same cost driver can differ when applying the high-low…

A: The High-low method is a cost computation technique that separates variable and fixed cost from…

Q: Give an example how manager can decrease variable cost while increasing fixed cost

A: Cost behavior: Cost behavior is the relationship between cost and activity and it is relevant to the…

Q: Identify the relative advantages and disadvantages of basing transfer prices on total costs,…

A: Please find the answers to the above questions below:

Q: Are variable costs always relevant costs? Explain.

A:

Q: What is the differential cost to produce product Zeta?

A: Given information is: Cost of producing Alpha = $23 per unit Additional cost of producing Zeta = $25…